Pay Raise Plan Sparks Questions over ‘Whether Our County Budget is Sustainable’

Pay Raise Plan Sparks Questions over ‘Whether Our County Budget is Sustainable’

Council members say union contracts could be renegotiated

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County Executive Marc Elrich met with the County Council on March 15 following the release of his fiscal 2020 budget

Dan Schere

Several pay and benefits recommendations in County Executive Marc Elrich’s budget proposal are being criticized by County Council members who worry that raises for county employees, combined with putting off a payment for a retirees health-benefit trust fund, aren’t the most fiscally responsible course.

Under a $5.7 billion budget plan released earlier this month and being scrutinized by the council, some union workers could get raises of close to 10 percent in part because they agreed to forego increases several years ago in a limping economy and were promised the increases when conditions improved.

In addition, the Elrich budget would not put money next year into the county’s retirement health benefits trust fund, established in 2011 to provide health care, prescription and life insurance coverage to employees, retirees and their dependents.

Council member Andrew Friedson said while he understands the economic pressures Elrich faces, he is concerned that the county exercise fiscal discipline.

“We all appreciate the hard work of our public employees. The challenge is whether our county budget is sustainable in the long term,” Friedson said.

Council member Hans Riemer also has expressed reservations about the budget’s future impacts.

“I was surprised. The fact that they moved the entire remaining contribution to the retiree health fund for [fiscal 2019] certainly took me aback,” he said.

Riemer said union contracts “raise real questions about affordability and sustainability,” and that the council will need to determine whether such large raises for employees are realistic over the next few years.

“If the council determined that this was not affordable, they could send it back and say, ‘Please come up with an agreement [with the unions] that is affordable,’” Riemer said.

The council has gone back to the bargaining table three times in the last two decades.

Council member Gabe Albornoz said he felt strongly about “honoring labor negotiated contracts.”

“We shouldn’t lose sight of the fact that our county employees are so important and have set a high bar and do excellent work,” he said.

Altogether, more than $28 million is budgeted to cover county employee salary increases in fiscal 2020, which begins July 1, and another $39 million would be needed annually in future fiscal years.

Elrich has justified his budget recommendations by referring to projections that state tax revenues could be down $80 million a year for the next two budget years. Elrich said a priority is to shore up a reserve fund, which functions as a “rainy day fund” and also helps the county maintain a high bond rating with credit rating agencies in New York.

Friedson, who previously worked in the state comptroller’s office, said the county must heed warnings from the comptroller of a possible recession. This, he said, requires increasing the retirement fund, in addition to boosting the reserve fund and bringing down debt.

Albornoz said he believes Elrich “did the best job he could” under difficult economic circumstances and that in forgoing the retirement fund, he “probably picked the least worst option.” But he wasn’t all positive.

“It will decrease our flexibility moving forward,” he said.

According to county officials, about one-quarter of the retiree fund has been financed. Comparatively, the county’s pension fund is 97 percent funded.

County Budget Director Rich Madaleno has said no retirees’ health coverage would be at risk if funds were withheld for a year.

Sara Harris, the president of the 7,000-member Montgomery County Retired Employees’ Association, said her organization hadn’t taken a position on the budget. Harris said the association has at times weighed in on whether they think more funding needs to be put into the health benefits trust fund and the pension fund.

“At this point we have not met as a board, and we will be doing that soon,” she said.

The council is scheduled to meet April 2 with members of the retirees association.

Elrich said he cut this year’s funding for the retiree health program because not doing so would have meant the county would have been forced to enact a $40 million savings plan for the final three months the current budget year and another $40 million in fiscal 2020. He said in the event of an economic downturn, he could tap reserves.

“I’m comfortable going into reserves only if I have to do it for revenue stabilization,” Elrich said during a recent news conference. “What I don’t want is for a manufactured budget that automatically creates shortages.”

Riemer said he wasn’t satisfied by that answer.

“I think the question is, how are they [Elrich] protecting against the likelihood that next year we’ll be right back here entertaining a recommendation to take this year’s retiree health contribution and put toward an anticipated shortfall,” Riemer said.

Council President Nancy Navarro said the job of the council between now and May will be to determine how viable the budget is when it comes to the union labor agreements.

“This [contracts] has been negotiated in good faith, so we’re going to have to take a look at what that looks like in terms of sustainability,” she said.

Gino Renne, the president of the county’s largest union, MCGEO, said he wasn’t concerned about the criticism of the contracts.

“The county’s budget people themselves admitted that the agreements are sustainable both short-term and long-term,” he said. “That is a wage enhancement that is one that is much earned by the dedicated men and women who serve the public.”

Renne said the wage increases cover 11,000 county employees between three unions. The money included in a category known as “deferred service increments” is deserved because it makes up ground lost during the last recession, he said.

“It’s money they’ll never recoup. And it’s money that was lost in their Social Security going forward, and it’s also lost in the county retirement benefits for a lifetime … all we’re trying to do is catch up,” he said.

When asked about the criticism that the money funding the union contracts was taken from the retirement trust fund, Renne said he wasn’t worried because the goal of fully funding it would not be achieved “any time in the near future.

“I’m a trustee on that fund, and I can assure you we’re years and decades away from even remotely the levels it needs to be funded at. You have to make decisions in the now,” he said. “So you can go from 24 to 25 percent funded?… This county workforce has been financially and workload-wise, in their opinion, have been exploited by the past economic situation since 2008.”

Renne said fewer than 2,000 members are likely eligible for the 9 percent raises because many employees are already at the top of their pay grade.

Dan Schere can be reached at Daniel.schere@bethesdamagazine.com

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